We Will Own 60 Percent of New GM as Treasury Kicks in Another $30.1 Billion

DETROIT – With 54 percent of General Motors’ unsecured bondholders agreeing to take 10 percent equity plus warrants for 15 percent more in the new company, the automaker goes into bankruptcy court Monday morning. The U.S. Treasury will loan GM an additional $30.1 billion on top of the $19.4 billion that has kept the company afloat since January. In return, the federal government will own 60 percent of GM until it can be paid back. The bankruptcy is expected to be filed before the New York Stock Exchange opens about 9:30 a.m. Eastern time.

Canada and the province of Ontario kick in $9.5 billion in return for 12 percent of the New GM.

The Obama administration believes GM will not need more than the $69.5 billion total committed, under current economic conditions, a senior official explained on background.

The New GM will be built from the “good assets” of the old GM in a Section 363 bankruptcy filing scheduled for June 1 in New York. As in its previously announced restructuring plan, the New GM will break even when annual U.S. sales reach 10 million units. As of last month, the industry’s Seasonal Adjusted Annual Rate was about 9.3 million, down from highs in the 17- to 18-million range earlier in the decade.

GM’s bankruptcy is expected to take 60 to 90 days, about two- to three-times longer than Chrysler LLC’s, the official said. “We hope and expect the outcome will be like Chrysler’s.” He stressed that the Obama administration has no interest in owning a portion of an automaker. “We had a choice as guardians of taxpayers’ money, to receive a greater recovery or we could have left (ownership interest) behind.”

The federal government will protect the taxpayers investment “by managing its ownership stake in a hands-off, commercial manner,” and won’t try to control day-to-day operations. No government employees will work for GM or serve on its board, although the president’s Automotive Task Force has said it plans to replace most of GM’s current board members.

The new board members will include chief executive officers and former CEOs, chosen regardless of background or politics. The administration official pointed to Chrysler’s new, interim chairman, Bob Kidder, a staunch Republican.

And GM will name a chief restructuring officer. According to a Bloomberg story, GM will name Al Koch, a turnaround specialist with AlixPartners LLP. He will report to GM CEO Fritz Henderson.

Here are details of GM’s pre-packaged bankruptcy:

• 10-million unit (total U.S. car/truck sales) breakeven point is down from 16-million before GM’s reorganization, cutting structural costs.
• GM’s $20-billion United Auto Workers’ Voluntary Employee Benefit Association obligation is replaced with a $2.5-billion note plus $6.5 billion in 9 percent perpetual preferred stock. The VEBA will own 17.5 percent of the New GM and hold warrants to purchase 2.5 percent more. The VEBA can pick one independent director but has no voting rights.
• Besides 60-percent equity for the government’s $30.1 billion in loans, the federal government gets about $8.8 billion in debt and preferred stock.
• The Canadian government (12-percent stake) will chose one initial director.
• The U.S. government will vote only on core governance issues, including selection of the board of directors and major corporate events or transactions.
• The U.S. Treasury is funding GM’s Warranty Support Program for $361 million.
• GM will seek “first day” authority to continue to pay suppliers and to honor customer warranties through its dealers.

GM’s last-minute deal with Magna International takes Opel/Vauxhall out of the equation. The Treasury department made it clear that federal loans to GM would have to fund U.S. operations only. Magna’s deal to buy a portion of Opel looks like this:

• GM will own 35 percent of Opel.
• Sberbank, a Russian government-controlled bank, will own 35 percent. GAZ will be an industrial partner to expand Opel’s reach in the Russian market.
• Magna International, founded in Toronto by Austrian emigre Frank Stronach in the late ‘50s, will own 20 percent in exchange for the equivalent of about $423.5 million in short-term liquidity. (Magna, which already assembles vehicles through Magna-Steyr in Europe, was a lead bidder to buy Chrysler from Daimler, but lost out to Cerberus.)
• Opel staff and/or dealers will own about 10 percent.
• The German government will loan Opel the equivalent of about $6.4 billion.

And so, the world’s second-biggest automaker becomes one of the biggest American companies to file for Chapter 11 reorganization. Check out motortrend.com and The Motor City Blogman for updates throughout the day Monday.

The New Slogan is "GM: Yes We Can"

DETROIT - Without betraying any private conversations, I can tell you that Bob Lutz is one of the most politically conservative auto executives I’ve met. And it’s a pretty conservative group. They don’t like regulation and government intervention, having been pummeled with it since the Johnson administration. Imagine my astonishment when Lutz heaped praise on President Obama and his automotive task force at an Automotive Press Association luncheon in Detroit, Thursday.

This comes just after I heard similar praise from unnamed sources who helped me understand the new Corporate Average Fuel Economy standard for a piece in the August Motor Trend. I’m too cynical about politics and government to believe we’re going to make it to 2016’s CAFE that easily. Lutz, the vice chairman and senior advisor who retires at the end of this year, attempted to put to rest the idea that General Motors is about to become Government Motors, even as the feds take up to 70-percent of the company in exchange for an organized bankruptcy and billions of dollars in loan guarantees. Here’s what he said:

“Finally, for the first time in our history, the American automobile industry has the ear of the administration. And we are dealing with a very high-ranking government body, called the president’s automotive task force and their prime goal is not to gain government control over the automobile business. They absolutely don’t want that. They want to revitalize the American automobile industry. Their number-one goal is to make us successful. There’s finally a realization that a country cannot remain economically strong and militarily strong and globally strong and have an impact if it is not backed up by a wealth-producing industry.

“Geeze, it took somebody 30 years for somebody to finally figure that out. But now we finally seem to be there.”

Lutz said he hopes the automotive task force evolves into an automotive ministry, which China has, or at least an automotive component of an industry ministry, which nearly every other industrialized country, but ours, has.

“We have never had anything like that in this country. Who are we going to talk to? NHTSA? They just do safety regulations,” he said. “Or are we going to talk to the EPA? They just do fuel economy or CO2 regulations or oxides of nitrogen and so forth. You can’t talk to the president or vice president. So you go from pillar to post, talking to a congressman here, a congressman there.

“I’ve always had this terrible feeling we’ve had no voice in Washington,” Lutz continued. “We’ll, I’m here to tell you, we finally have one.”

Yeah, I find it hard to believe, too. Lutz joked about the new relationship, using one line he didn’t get in for his appearance on “Late Night with David Letterman.” His company’s new slogan, Lutz said, is, “GM: Yes We Can.”

If none of this affects you, consider what Lutz said about near-future product that GM showed to the task force earlier this year.

“Cadillac CTS coupe got an amazing amount of attention from members of the presidential task force,” he said. “We kept saying, ‘you don’t want to look at this one. It’s available with 560 horsepower. It doesn’t get very good gas mileage. So let us show you our future tiny little sport utilities over here. And they kind of stayed stuck at this one. They said, ‘well, when’s it coming out and what’s it going to cost?’

“Which shows that it doesn’t matter where you’re employed or what you do, normal people get turned on by great cars. That’s the lesson. That was sort of the moment I began to take heart.”

Gettin’ Jetson: 2010 Toyota Prius

As I pressed the starter button and the 2010 Prius’s hybrid-system monitors lit up, so did my daughter’s eyes. “Whoa!” she said from the back seat as we prepared to drive to school this morning. “Is this the kind of car a secret agent or James Bond would drive?”

“No, honey,” I replied. “James Bond drives an Aston Martin.”

My daughter pondered a moment.  “Isn’t that an old car?”

And there you have it: the simplicity of youth. In five words, my eight-year-old had nailed what makes the new, third-gen Prius so special.

Perhaps more than any other current production car, the 2010 Prius feels like the George Jetson ride we were all promised four decades and more ago. It’s thoroughly, conspicuously modern. Okay, it has a steering wheel and pedals, and it does ride on four wheels and not an anti-gravity pack or some such, but otherwise the Prius is one of the few vehicles on the road today that can truly claim to be a 21st Century machine. In comparison, 007’s Aston has more in common with Karl Benz’s Patent Motorwagen from 1885.

I liked the previous Prius (I was one of the jurors who voted the second-gen car Motor Trend’s 2004 Car of the Year). But though it was a vast improvement over the original, I couldn’t help but feel that Prius v2.0 was still a bit of a science project. It was roomy enough, drove remarkably well, and unquestionably set a high standard for vehicular engineering, yet it still felt like only 80-percent of a real automobile. Steering was springy and occasionally weird. You could feel the light weight. A good hailstorm, you’d think while driving it, and this thing will look like half a waffle iron.

The new Prius, however, is all-car. The increased size over its predecessor translates into huge gains in cabin room. You’ll “wow” passengers who open the rear doors or the rear hatch. More important, though, this Prius is all grown up. It’s a giant leap ahead in solidity and quiet; if it wore a Lexus label, no one would be surprised. It just feels way heftier and more robust—which makes the increases in mileage (to 51/48 city/highway mpg) all the more remarkable.

I count myself as an ardent enthusiast, and naturally I gravitate toward machines that go vroom vroom and knock your insides about and all that. But I can’t help but grin with delight at the execution of this cutting-edge ride. The near-flat-bottom steering wheel, for instance. It just feels superb in your hands, and looks racy to boot. The seats (optional leather in the test car) support beautifully. Power is up over the old car, and you can tell. The 2010 Prius moves with more ease (new is an EV mode that does its best to hold the car in full-electric up to 25 mph for a half-mile). You don’t feel like you’re missing out on “real car” stuff, either. Standard are seven air bags (including a driver’s knee bag). Also on board is a new version of the self-parking system seen on the Lexus LS, plus radar-guided pre-collision with automated braking capability.

Above all, though, is the 21st Century driving experience this Prius affords. Luddites will lament that cars like this one threaten the good old days, but frankly I’m intrigued by the future-glimpse the Prius provides. This isn’t a fast or sporty car, but by no means is it a penalty drive, either. In fact, Prius v3.0 is a darn well-sorted rig—comfortable, smooth, quiet, loaded with creature comforts. And it just happens to return 51 mpg while you’re nipping and tucking through urban gridlock. One can well imagine how far Hybrid Synergy Drive will evolve in the years ahead. You’ll get your insides-jostling power, don’t worry.

Meantime, this Prius has got my attention. As it turns out, Chez St. Antoine needs a new automobile in the garage. The Prius wasn’t on my original shopping list, but after driving the 2010 . . . the price is do-able; just over $28K with leather, premium audio, Bluetooth, etc. Fact is, the futurist in me is curious and impressed enough by the new Prius that I just may try a couple years playing George Jetson.

My daughter might even think I’m a secret agent.

BMW X1: Striving to be the driver’s choice among small SUVs:

As its name suggests, the BMW X1 represents the entry level in the German carmaker’s SUV lineup.

Driving the Chevy Volt isn’t special, and that’s good:

We’ve had our first taste of the drive system under development for General Motors’ pioneering Chevrolet Volt, piloting a test mule based on the Chevrolet Cruze at the company’s Warren (Mich.) Technical Center, and it left us hungering for more.

2010 Hyundai Genesis coupe: Another look with a real-world drive:

OK, this isn’t really a first drive. Or even a second one. In fact, car people have been flogging the 2010 Hyundai Genesis coupe all over the world for a while now.

2010 Hyundai Genesis coupe: another look with a real-world drive:

OK, this isn’t really a first drive. Or even a second one. In fact, car people have been flogging the 2010 Hyundai Genesis coupe all over the world for awhile now.

Superformance Shelby CS GT40: Does lap times as easily as time travel:

Only a short drive from the Superformance company headquarters, the road opened up: five lanes wide, fields on either side, clear vision and no traffic.

New Cadillacs Could Launch During GM’s Bankruptcy

DETROIT - It’s too easy to tie in computer glitches that delayed Cadillac’s webcast on the 2010 SRX and CTS Sport Wagon Wednesday morning. Broadcast shortly after General Motors announced that its bond exchange offer of 225 shares of common stock per $1000 in debt expired without enough takers, the webcast’s toll-free support number clogged up.

“You have reached your daily limit for number of calls,” came the recorded voice. When the webcast, led by Cadillac’s executive director of marketing Steve Shannon, and project director John Howell, finally began more than 30 minutes late, most of the questions were about Cadillac’s viability and the prospect of launching a serious competitor for Lexus’ bestselling RX crossover while GM may be in Chapter 11 reorganization. First, a look at the product:

2010 Cadillac SRX:

* Base price will be $34,155 with front-wheel-drive and the standard, 265-horsepower, 223 pound-foot 3.0-liter gas direct-injection V-6, $3,520 less than a comparable Lexus RX350.

* Optional features will include 20-inch wheels, a pop-up navigation system in its CTS-like interior, a hard-drive audio system that allows you to “pause” live radio. Popular-equipment models will sticker for $40,130.

* The optional 300-horsepower/295 pound-foot 2.8-liter turbo V-6, available only with the Haldex all-wheel-drive system, will be priced in the mid-$40s and goes on sale later in the fall.

* Cadillac design director Clay Dean calls the rear daylight opening line, or inside of the roofline, “almost coupelike.” Cadillac figures it has an expressive, stylish midsize luxury crossover in a segment in which the main competition (e.g., Lexus), is too conservative.

* On sale late July.

2010 Cadillac CTS Sport Wagon:

* With more standard equipment, it will be priced slightly higher than the base CTS sedan.

* The multi-port fuel-injected 3.6-liter V-6 departs the CTS line for 2010, replaced by the standard 3.0-liter gas direct-injection V-6, and it’s rated 270 horsepower (+5 horsepower versus the SRX) and 223 pound-feet in the CTS wagon and sedan. The 304-horsepower 3.6-liter direct-injection V-6 is optional for both bodystyles. With this, GM has transformed most of its V-6-powered models to gas direct-injection technology.

* Cargo capacity of the Sport Wagon with the rear seat folded is 54 cubic feet. There are crossbars available for the integrated roof rack, to accommodate a bike rack or cartop carrier, for example.

* On sale late August.

* The CTS coupe is still on track to make its showroom debut a year after the wagon, as an ‘11 model.

The CTS Sport Wagon is “like an independent film” that could break out and find a large, cult audience, Shannon said, while the SRX is designed to be Cadillac’s blockbuster, a crossover of the type more popular in the U.S.

So what about the Western European market? CEO Fritz Henderson has said that GM cannot spend the money, these days, to expand Cadillac there as once intended. And the CTS Sport Wagon is designed largely for that market. Howell said he expects the Sport Wagon take rate to be “10 to 15 percent, easily. Maybe we can take a little more, maybe not.”

Whatever happens, the CTS factory is flexible and can shift production between sedan and wagon easily. In fact, a shutdown of that plant has already delayed the CTS Sport Wagon’s launch to late summer. A 10- to 15-percent take rate based on 2008 CTS sales would be nearly 6000 to 9000 wagons, although total sales will be much lower by the end of ‘09. That take rate, at the current CTS sales rate would, in fact, be closer to the 3000 to 4000 per year in the U.S. Cadillac predicted when the wagon was first unveiled to the press a couple of years ago.

GM could end up launching these two important new Cadillacs while bondholders try to beat it up during a pre-organized bankruptcy. Some critics will snicker at the apparent perversity of advertising and marketing of two $40k+ luxury models. They’ll ignore the fact that the SRX and CTS Sport Wagon are high-profit models. Cadillac is GM’s best-sorted division, and yet with these two additions, just half its lineup looks modern and forward thinking. No matter who owns or controls major interest in GM next month, they prove that GM still has designers and engineers on its payroll.

Superformance GT40 will do lap times as easily as time travel:

Only a short drive from the Superformance company headquarters, the road opened up: five lanes wide, fields on either side, clear vision and no traffic.